Meta profited from illegal scam ads, California county lawsuit alleges

California’s Santa Clara county has sued Meta Platforms, alleging it has profited from Facebook and Instagram ads promoting scams in violation of California’s false advertising and unfair business practices laws.

The lawsuit – filed on Monday in Santa Clara county superior court on behalf of all California residents – accuses the social media giant of tolerating fraudulent advertising on a global basis. The suit seeks restitution, civil damages and an order prohibiting Meta from engaging in unfair business practices.

Citing leaked internal documents first reported by Reuters last year, the complaint alleges that the company earned as much as $7bn in annual revenue from so-called “high-risk” scam ads which show clear signs of being fraudulent.

Rather than undertaking a broad crackdown on fraudulent advertisers, the county alleges, Meta largely tolerated the misconduct and even established “guardrails” to block scam reduction efforts if they cost the company too much money.

Meta said it intends to defend itself against the claim.

“This claim relies on Reuters reporting that distorts our motives and ignores the full range of actions we take to combat scams every day,” said a Meta spokesperson, Andy Stone.

“We aggressively fight scams on and off our platforms because they’re not good for us or the people and businesses that rely on our services.“

In the suit, Santa Clara alleges that Meta materially contributed to an epidemic of fraud by allowing middlemen to sell accounts to place ads that were protected against enforcement, and targeting scam ads at users who had clicked on similarly bogus offerings in the past. Citing Reuters’ testing, the county alleged Meta’s generative artificial intelligence systems often assist unethical marketers in creating ads for scams.

“The scale of Meta’s misconduct has reached an extraordinary level, and it needs to stop,” county counsel Tony LoPresti told Reuters. “As civil prosecutors in Silicon Valley, we have a special duty to hold tech companies accountable to the law.“

In the complaint, the county seizes on Meta’s reassurances of its anti-scam efforts as a component of its alleged misconduct. By assuring users that anti-scam efforts are its top priority and that it rigorously reviews ads for violations of platform policies, the county says, Meta deceived the public and hid the degree to which bogus ads have boosted its profits.

“On information and belief, Meta can even adjust the flood of scam ads it allows on its platforms in order to smooth its earnings or hit specific revenue targets,” Santa Clara’s filing states.

To assist in the suit against Meta, Santa Clara’s county counsel is working with three outside law firms – Bernstein, Litowitz, Berger and Grossmann; Renne Public Law Group and Bishop Partnoy. But the county will retain full control over decisions involving the case, LoPresti said, and the firms will only be paid if the county wins.